I am your typical housewife living in high maintenance suburbia. I have a handsome husband, 2 kids and a flock of pet chickens. I try and feed my family with $100 a month. With the help of coupons, gardening and bartering I am able to squeeze the most out of our grocery budget and still manage to have a little fun along the way.

5 Easy Ways to Avoid Overdraft Bank Fees

The links in the post below may be affiliate links. Read the full disclosureBy Mavis Butterfield on March 7, 2017 · 7 Comments

Let’s say you do everything right. You’ve set a budget and are sticking to it. But you make one tiny addition error and your account goes into the negative. For many people living paycheck to paycheck, this is something that happens all too often. And once that account goes negative, the hits just keep on coming in the form of overdraft fees.

The average price of an overdraft fee {when the bank pays for the debit even though your account is at or below zero and charges you a fee for doing so} is around $35. Wowza! That means a small error or unexpected charge could throw your account into the negative and end up costing you hundreds. If money is already tight, a $100+ hit can break your budget for the month. So how do you avoid that situation? Here are 5 easy ways:

Decline Overdraft Coverage: You can opt of this service. Banks consider overdraft protection a convenience service, so you can decline it. That would mean when there is no more money in your account, the charge is declined. It could make for an embarrassing encounter at a checkout counter, but it could save you so much money! Keep in mind, if you opt out, this will affect debit card transactions as well as checks. So if you write a $600 check to pay your rent and your account has $599.99, your check will be returned unpaid. Another thing to be aware of is many banks charge a returned check fee equal to the overdraft charge. So while the declined charge would alert you to the overdraft status, you may still see charges.

Set Up Alerts: Speaking of alerts, many banks have services you can sign up for that alert you when your account balance drops low or falls below zero. You will get a text or an email heads up. If your bank does not offer this, you can use a separate financial program like Mint.com that will do it for you. This is a great proactive approach to avoiding those fees.

Apply for a Sweep Account: Most banks offer some sort of line of credit or sweep account that is connected to your checking account. If the balance ever drops below zero, they sweep money from the attached account. You typically have to apply for this credit like you would a credit card, and most often there is a small annual fee. But if you aren’t great about keeping track of your spending, this is a great route to go.

Link a Savings Account: This works much the same way as the sweep account in that it will pull from the savings account if your account balance goes into the negative. The only difference is that it pulls from your own account, and you obviously do not have to apply for credit or pay an annual fee. It’s just an automatic shift of your money from one account to another to cover the pending charges.

Purchase a Pre-paid Debit Card: If you prefer not to carry cash, but you want to limit your spending, look into a pre-paid debit card. There are many that charge no fees and are accepted anywhere major debit cards are accepted. When there is no more money on the card, your spending stops! Since it’s not tied to your checking account in any way, there are no overdraft fee possibilities.

And there you have it. Obviously I highly recommend checking your account balances often to avoid these fees, but I know how easy it is to get distracted by life! Hopefully these simple tricks help you save some money. Do you have any to add to the list?

Comments

These are useful tips, however, having worked in a branch, I strongly recommend confirming the details of some of these strategies. For example, at the bank I worked at, opting out of debit card overdraft servicing will stop u from overdrawing your account with “everyday debit card transactions” (like swipes and online orders) but nother prevent automatic withdrawals like subscriptions and membership fees. You would also have to be very clear (and take notes about who you talked to and what they said) about declining checks and ACH debits when you don’t have enough funds. With the company I worked for that’s something only a manager can change and only you would still incur the returned item fee mentioned above. Also, with thus bank, the savings overdraft protection transfer incurs a fee too. Less than the overdraft but still worth noting. My recommendation is to sit with a banker and ask what your options are, ask lots of questions, and consider taking notes. Some bankers understand and can communicate these policies better than others.

Also see if there is a NSF (non sufficient funds) charge if you “bounce” a check. The bank could charge you or sometimes the person cashing the check (had this happen to me). It cost me $50 – the person who tried to cash it. This was in Canada so not sure in the United States.

I had my credit so good that I could borrow close to 8,000.00 no collateral. However I had to have back surgery after I had it paid down to 5,000.00. I ask them to please lower my payments because I could only work around 15-20 hours a week. I just needed it from 225. to 165. A month. Nope here is a judgment. Seven years later they wanted to work with me after it had increased the interest back to over $8000.00 So I said no now I don’t want to work with you. That has been a total of 9 years that they have ruined my excellent credit. So forgive me if I don’t share the same enthusiasm as you when it comes to a Credit Union. I even went to court and sat with the Banker as they put a JUDGMENT on MY CREDIT.

Nowadays there is no float to cushion any errors!!
1) Accounts deduct checks before payts, starting with the largest. Then they add in any deposits for the day. That is why if a rent check pulls money from your accounts, 3-4 other smaller checks will also bounce!!
2) Set the automatic notices for eg, $100 — if you typically write most checks for under that.

Here’s an old school no brainer…..keep a ledger. Don’t rely on what the bank tells you is in your account, what the ATM balance says, or what the balance you saw online is. These amounts can be grossly incorrect, but if you keep a written ledger and note you debit purchases, any fees, bill pay, checks written, deposits, etc. you will be more accurate on your balance. Just make sure you do your math correctly! Sometimes checks can take weeks or even up to 6 months to clear and some debit transactions can take up to 10 business days.

As you said, I keep a ledger and balance my checkbook every month. I also keep $500 in my checking account that I refer to as “hidden” – I don’t show it on my balance. This covers me if I make a math error. Only have to remember to add the $500 in when balancing each month – but no bounced checks!